Deconstructing bad Credit Mortgage Loans

Deconstructing bad Credit Mortgage Loans

Bad credit mortgage loans are loans endowed to people unfortunately do not enjoy good credit history. The problem with most people is that they are not informed that these loans can be very confusing at first try, and the deluge of information contained in loan contract will be sufficient to drown any average mind any day. Hence, the probability of facing problems in the future (like conflicts on the schedule of the bills, when the payments are due, fixed amount of interest, and the charges included in the package) is much higher, making the granting of and enjoying the loan a messy business for most people.

Before consenting to any loan contracts or even before you think about signing that enticing package, it is good to understand few concepts that are considered standards in the loan industry. We can do so by deconstructing the general provisions of mortgage loans, what they mean to us, and what privileges we enjoy under their tenets.

Credit rating. Credit rating is basically a system of ranking of people’s financial condition. It a measurement of how much people can borrow based on their past financial performance. This is obtained by evaluating the person’s assets and existing liabilities, his or her income, status (married couples with kids and only one partner working will have lower ranking), and other factors. It is extremely important for future loans; the interest and charges of bad credit mortgage loans will depend heavily on this factor.



Mortgage. Mortgage is a property or asset of the borrower that is put up as a safety net for the lender when everything falls to worse situation, which is that the borrower cannot do the part of the bargain. For example, if a borrower has not paid the dues for six months and in spite of the repeated solicitation from the lender, the loan is considered consummated and the lender will have the right to transfer the ownership of the mortgage under his or her name. A mortgage loan is also called a secured loan for the fact that the lender is protected from any untoward incident in the future, like the death of the borrower, or when the borrower files bankruptcy and will be under socialized endowment from the government.



Principal. Principal is the amount that the borrower is asking the lender to grant. The amount will not be as is when given to the borrower for some cases, because the lender would deduct some charges and fees. For some companies however, the principal will be given as is, with the charges and fees being deducted in the future bills.



Base rate. Base rate is the interest as stipulated in the contract. This is the interest rate that you expect that your loan will have, which means that you will be paying more than the principal. Another interest, called standard variable rate, is a two or three percent interest added to your regular bills; as a variable interest rate, your total mortgage rate will therefore be subject to change.

By knowing the universal features of bad credit mortgage loans, you will have better understanding in loan contracts and heightened sense of discernment in deciding what kind of loans you are ready to bind yourself into.

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